For Immediate Release: September 22, 1999
Contact: David Almasi at 202/543-4110 x106 or [email protected]

The Federal Tobacco Lawsuit is Bad Economics, Bad Law &
Bad Governing

The federal lawsuit against tobacco companies announced today by Attorney
General Janet Reno is bad economics, bad law and bad governing, says a National
Policy Analysis #255 paper published by The National Center for Public Policy
Research.

The paper points out several problems with this lawsuit:

* Economics: The Justice Department alleges the federal government is
due money from tobacco companies because the government loses money when
citizens purchase and use tobacco products. This is bad economics: Government
actually profits more than tobacco companies from tobacco sales. Government
takes in an average 53 cents per pack in tobacco taxes while it saves,
in the form of a reduction in Social Security and other costs of programs
for America's elderly, an average of 32 cents for every pack of cigarettes
sold. According to the New York Times, tobacco companies make about 28
cents per pack of cigarettes sold.

* Law: The Justice Department will probably lose this lawsuit. In 1997
Attorney General Reno herself agreed that there are no legal grounds for
this suit.

* Governing: According to Senator Judd Gregg (R-NH), an anti-tobacco
politician who chairs the Senate subcommittee with oversight over the Justice
Department's budget, the Justice Department's legal division is already
overworked, and the Justice Department is facing a budget cut this year.
Pursuing this suit takes needed resources away from other Justice Department
projects that are more likely to succeed.

"Even in the unlikely event that the federal government wins or
settles this lawsuit," said Amy Ridenour, president of The National
Center for Public Policy Research and author of the paper, "the poor
and lower middle class will pay for most of any 'damages' the government
wins. Tobacco companies will raise the price of cigarettes to pay for the
suit, making any award or settlement an indirect tax on smokers. Fifty-three
percent of all federal tobacco taxes are paid for by people who make under
$30,000 per year, and only 7 percent by people making over $75,000 per year."
Ridenour added: "Since the lawsuit will probably lose, however, the
taxpayers will be stuck with the tab for legal expenses."